Hiteshji

What is your view on Prakash Industries and repco Home finance

Repco appears to benefit out of the relationship estate cycle.

Company’s debt has come down by 600cr in Sep qtr. equity raised 1,000 cr.
company is replacing debt with equity?? does it mean valuation is high…

Commentary from Q2 earnings call was good. From the developments in last 6 months, it it might look like the management is aggressive and trying over the limit of group’s ability. I think in the past they have executed well and maintained operation smoothly. Now the challenge is to harmonise/ synchronization of new additional capacity and getting to efficiency. We will know these metrics in next1-2 years. In 4-5 years they can get to 3000 bed capacity with ARPOB of Rs50000 at group level , with ebidta of 25%, and 85% occupancy, they can achieve an operating profit of over Rs 1000 Cr. There is optimism built in these assumptions.
However, the trajectory looks generally ok, with health care getting more and more organized, and the company’s effort to bring in high quality doctors , improvement in brand recognition. There is decent runway here for bit of expansion in valuation and reasonable growth.
Caveat is “the management will continue the good execution”.

So what I think is & tried to researcher deeper & found out:

1. The report from where I took data is of Equirus initiative coverage report on APL Apollo tubes… I tried to go to many companies related to steel tubes company PPT & initiative coverage, but can’t able to verify the data about installed capacity higher than market size (might be it was just estimates & reality would be different as all companies have different estimates)
   But I can verify data about ERW Pipes segment (where hariom has main focus)
   

So, this was the original image… ERW Pipes has 9-10 mtpa installed capacity & 6-7 mtpa size… so this is somehow correct

This is from DRHP of Vibhor steel tubes… here it stated as demand for ERW Pipes as of FY25 is 9 mtpa + their would be export market as well, so demand is almost maching installed capacity if Equirus is correct + industry is expected to grow at 7-9% CAGR for next few years (so feel not much over capacity issues in this segment)

2. So for asset turnover… their asset turnover is lower because they are running at just 35-40% capacity utilisation… from last 3-4 years they are doing Capex & increasing capacity at full pace thatwhy their Asset turnover are lower + their WC cycle was worsen cause of such huge capex
   They can match asset turnover of peers once their capacity utilisation reaches above 60%; also they are now Focusing on normalising WC cycle this can lower total assets (lowering inventory & Receivables + paying debt from that) and Asset turnover can increase drastically due to this + Deleveraging can lead to ROE & ROCE inching upward (above 20% can easily possible if management walk the talk)
   Last 3 yr capacity:
   

   Last 3 year volume:

   

Hope I can answer ur query… open for future discussion

Disc: Invested & Biased